Proportion of U.S. VC-backed Companies Valued at $100M That Proceeded to Unicorn Status

Unicorns aren’t as rare anymore — CBInsights came out with a study earlier in the year that tallied 326 private companies around the world that’s valued at $1B+. However, data from Pitchbook shows that it’s still relatively hard to become a unicorn. My analysis shows that over the span of a 20 year period, less than 8% of the companies that have attained $100M post-money valuations have become unicorns.

Since most of the unicorns are in the U.S. and that’s the market I’m most familiar with, I wanted to see how many of the U.S. VC-backed companies that hit a $100M valuation proceeded to become unicorns (insert witty name for 1/10 of a unicorn). Also, is the VC market correlated to public markets? Let’s find out.

Below is a graph that shows the proportion of U.S. VC-backed companies valued at $100M that ultimately went on to become unicorns (huuuuuge shoutout to the Pitchbook research team for compiling the data for me). I felt it was important to go back 20 years to get data and see the impact of major moments in the public stock markets (i.e. tech bubble burst in early 2000s, Great Recession in 2008, Great Recovery 2010+).

Below is the same data in tabular format for additional clarity:

First thing to note is that the steep decline starting in 2014 is likely due to the fact that companies during that year and beyond haven’t had enough time to achieve unicorn status. I will have to dig into more of the data around the speed of attaining unicorn status (stay tuned!) for the purpose of this analysis, but it has historically taken a long time. This link here from fleximize shows that most companies that are unicorns take anywhere from 6–10+ years to hit that goal. There are exceptions to this — Bird became a unicorn in less than a year after it was founded!

Besides that, there are some interesting findings from the data:

  • Excluding 2014+ for the reason mentioned already, the proportion of eventual unicorns by year cohort have steadily increased from 1999 to 2014–4% of $100M companies in 1999 to 13% in 2014.
  • The number of companies valued at $100M have also increased dramatically — 90 companies in 1999 to 427 companies in 2018, an increase of 374%.
  • 2008 is particularly interesting. Relative to all of the prior years, 2008 saw one of the highest numbers of $100M valuation companies AND the highest percentage of eventual unicorns. We all know what happened to the economy in 2008, but the fact that it was a relatively strong year for startups is somewhat a paradox. Perhaps the VC market feels a delay from the impacts of the public markets, as 2009 saw a dip in eventual unicorns and $100M valuation companies. It’s also possible that startups that survived the Recession years became more resilient, savvy, and focused in their business models under the capital crunch, and so more of them became successful as the economy rebounded.
  • 2000 saw the highest number of $100M valuation companies in a 13 year period. The dot-com crash began in March 2000 and ended around October 2002. The high number of $100M valuation companies in 2000 followed by its rapid decline through 2003 (before rebounding in 2004) essentially mirrored the tech crash, but with a lag.
  • Since 2010 and amidst the near 10-year bull run, more and more startups have become unicorns, especially as VC has become such a sought after asset class for investors.

In my opinion, here are the most important takeaways:

  • The VC landscape mirrors the public markets, albeit with a lag.
  • Looking at the data in aggregate of the past 20 years, fewer than 8% of companies valued at $100M valuation went on to become unicorns. This percentage will go up, given the current market climate and all of the capital chasing quality deals (e.g. Softbank is planning to raise a second $100B Vision Fund). However, the data shows it’s still extremely hard for companies to become a unicorn even after hitting $100M valuation, a very admirable milestone to achieve especially before this recent 10-year bull run. Of course, that proportion should be higher or lower depending on which direction you go from the $100M valuation hurdle (i.e. there should be more eventual unicorns in a group of companies that achieved a $500M valuation and there should be fewer in a group of companies that achieved a $50M valuation).

There are certainly a lot of unicorns in the wild these days, but the data shows they are still special… for now. For startup founders, it’s important to keep the pedal to the metal. From a portfolio construction perspective, investors should be cautiously optimistic when their companies hit a $100M valuation.

Venture Investor @ Upshot Ventures